Why fund managers call Megaport one of the ASX's clearest AI beneficiaries
Megaport's Latitude.sh acquisition has turned a connectivity business into an AI compute platform, with fund managers pointing to contract wins worth hundreds of millions of dollars.
21 Jul 2026 · 7 min read
In short
Megaport raised $827 million in 2026 to fund new GPU rental contracts and build an on-demand GPU compute pool through its Latitude.sh subsidiary.
Latitude.sh's on-demand annualised recurring revenue rose 31% since December 2025, with pro-forma group ARR tracking toward $660 million.
Fund managers including LSN Capital Partners note Megaport secures customer contracts before deploying capital, reducing utilisation risk on its compute expansion.
Network-as-a-service provider Megaport has become one of the ASX's clearest AI infrastructure plays following its acquisition of compute business Latitude.sh. Wilson Asset Management's May 2026 Article argued the Australian market had been crying out for an artificial intelligence beneficiary beyond BHP, noting Megaport bought Latitude for around eight times enterprise value to EBITDA versus offshore peer DigitalOcean's valuation of over 20 times.
From connectivity to compute
The scale of the shift has been rapid. LSN Capital Partners' May 2026 Monthly Report detailed a significant AI infrastructure contract worth around US$183 million in total contract value, noting Megaport's model requires customer contracts to be secured before capital is deployed, materially reducing utilisation risk and supporting expected returns exceeding 20% over the initial contract term. Pendal Group's June 2026 Newsletter confirmed an $827 million capital raising to fund both new GPU rental contracts worth US$266 million and a new GPU on-demand rental pool of US$252 million, positioning the company as what it called a globally distributed AI inference cloud.
We believe MP1 is increasingly evolving from a connectivity provider into a broader connectivity and compute platform, leveraged to structural growth in AI and cloud infrastructure.
— LSN Capital Partners, Monthly Report, May 2026
Tamim Funds Management's detailed June 2026 Article set out the risks alongside the opportunity: the $827 million entitlement offer was priced at a 13.9% discount to the last close, diluting existing shareholders, while the $350 million GPU pool represents capacity being deployed ahead of confirmed customer demand, a different risk profile to Megaport's four already-contracted deals. Blackwattle Investment Partners' April 2026 Monthly Report nonetheless described the combination of an existing 1,000-plus data centre network with the Latitude compute business as one of the most compelling investment cases it has seen in some time.
What managers are watching next
With Latitude's on-demand annualised recurring revenue up 31% since December 2025 and cumulative contract announcements taking pro-forma group ARR toward $660 million, Ellerston Capital's May 2026 commentary noted the customer base is predominantly hyper-growth AI applications achieving exceptional 25%-plus unlevered returns for Megaport, transitioning the stock from what it called a battleground name to a consensus AI winner. Managers including Yarra Capital Management remain positive on both the core connectivity business, still growing double digits, and the compute division's exposure to accelerating AI inference demand.
Questions
What is Megaport's Latitude.sh business?
Latitude.sh is a compute-as-a-service business acquired by Megaport in late 2025, providing on-demand access to GPUs and CPUs that complements Megaport's existing network-as-a-service connectivity platform.
Why did Megaport raise $827 million?
Megaport raised $827 million to fund capital expenditure on new GPU rental contracts worth US$266 million and to establish a US$252 million on-demand GPU rental pool, positioning the company as a globally distributed AI inference cloud provider.
What risks do fund managers flag for Megaport?
Tamim Funds Management highlights dilution from the discounted capital raise and utilisation risk on the speculative GPU pool, which is being built ahead of confirmed customer demand, as the main risks alongside intensifying competition from hyperscalers.
28 managers, 94 comments, with each manager's latest recorded position.
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